TMI Blog2015 (7) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... ge was being assessed. The record demonstrates that the AO chooses to rely more on postal authorities and makes no effort to cross check the information from the AO of M/s Smridhi Sponge who admittedly had many transactions in cash with some parties. M/s Smridhi Sponge as per record was not a dummy entity but a functional thriving entity. What repeatedly emerges from the above-mentioned facts and evidences is that the assessee during the assessment proceedings and in the appellate proceedings makes an all out mammoth exercise to give the details of M/s Smridhi Sponge Ltd. and also traces the two specific cheque numbers mentioned in the seized documents which were paid by the bankers of M/s Galaxy found mentioned as “Galaxy” in the seized documents however surprisingly for unstated reasons the department sits back after issuing notices to the address provided of M/s Smridhi Sponge relying blindly on section 292C of the Act only on the rationale that the print outs had been founded from assessee’s premises and thus they necessarily disclosed the assessee’s undisclosed transactions with the said concern. The said conclusion of the tax authorities is completely misplaced on facts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eated inactions speak louder then the half hearted actions undertaken. The evidences remains unrebutted on record. No effort to co-relate the assessee’s alleged undisclosed transactions with M/s Smridhi Sponge appear to have been addressed so as to demolish the consistent claim on record that it had no dealings with the said concern. In such a background the departmental stand that the level of information available with the assessee proved that the assessee had interactions with the said concern is adding insult to injury. The silence of inaction speaks much louder than the frenzy of the misdirected actions necessitating a pro-active department to address the fest spreading malaise lest the tools of search and seizure are reduced to a farce. The repeated inactions speak louder than the half-hearted actions taken. We are of the view that as far as the assessee is concerned the onus to address the seized documents qua which a statutory presumption has been drawn stands fully discharged. - Decided in favour of assessee. - I.T.A .No.-2453/Del/2013,I.T.A .Nos.-2925-2926 /Del/2013 - - - Dated:- 16-6-2015 - Smt Diva Singh and Sh.T.S.Kapoor, JJ. For the Petitioner: Sh. Sanj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of ₹ 1,20,33,295/- on account of transaction pertaining to M/s Smridhi Sponge. 5 (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO in making addition on the basis of impounded documents. (ii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in sustaining the above addition by misinterpreting the provision of section 292C of the Act. 6. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in not taking the investigation to logical conclusion by cross verification from the Smridhi Sponge, despite the assessee providing all cooperation and information about the whereabouts of Smridhi Sponge. 7.(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in arbitrarily presuming the figures on loose sheets to be the transaction related to purchases by the assessee from Smridhi Sponge. (ii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Area, Mathura Road, New Delhi on 26.02.2009, loose papers pertaining to the assessee company were found and impounded. Subsequently the case was centralized in Central Circle-2, New Delhi by CIT, Delhi-IV, New Delhi u/s 147 of the Act vide his order F.No.-CITIV/ Centralization/149/2009-10/2298 dated 30.11.2009. The record shows that referring to the documents found, the AO takes into consideration the Annexure-2 wherein amongst other pages specific pages 11-14 contained details of transactions with M/s Smridhi Sponge. The Assessing Officer considering these documents observed that they pertained to 2007-08 2008- 09 assessment year. Accordingly in view thereof the case of the assessee for these two years was re-opened after recording of reasons. 3.1 The re-opening was assailed by the assessee in the assessment proceedings and also in the appellate proceedings unsatisfactorily however, since the same is not under challenge in the present proceedings, reference to the facts relatable to the same do not require any mention except the fact that the assessee in response to the notice received declared income of ₹ 1,46,690/- identical to what was filed in 2007-08 Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9000 Total purchases 14197743 Payment received 1027300 Freight 921000 Total 16155043 Balance 100514 16255557 16255557 Opening Balance 100514 Page no.13 Payment 9495789 Purchases 11478441 Service Tax 2433 Freight 543000 Balance 2425138 Total 12021441 Total 12021441 On the basis of above trading account has been worked out as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 10,00,000 on account of purchases. When any person makes both, sales and purchases outside the books of accounts (as is the case now), there is always some money locked up in debtors and he does require some minimum amount with himself, to carry on the business outside the books of accounts, because business is a continuous activity and all the purchases and sales does not happens on one single day. Therefore when documents suggests that an assessee has made sales and purchases both outside the books, than in that case, in my humble view by applying the accounting concept of peak theory or telescoping, two additions are called for i.e. (a) one on account of gross profit earned and (b) minimum capital requirement to carry the business activity outside the books of accounts. 7.16 To arrive at the capital required to carry business outside the books of accounts, I find from the appellant financial accounts that during the year under consideration the Debtors to Sales Ratio is 35.86% Debtor = ₹ 55.30 lacs Sales = ₹ 154.28 Iacs Debtor to Sales Ratio = 55.30xl00 =35.86% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.83,75,435 The appellant thus gets a relief of ₹ 1,47,78,159 (Rs.2,68,11,454 minus ₹ 20,68,108 minus ₹ 99,73,187), out of the total addition of ₹ 2,68,11,454 made in Assessment year 2007-08. 5. Aggrieved by this finding, both the assessee and the Revenue are in appeal before the Tribunal. 6. The Ld. AR addressing his appeal submitted that in his arguments he would not only be addressing the grounds raised by the assessee but he would also address the assessee s stand on the grounds raised by the department. On query the Ld. CIT DR stated that he has no objection if the arguments are first advanced by the Ld. AR. In the said background the arguments were first advanced by the Ld. AR. Before advancing his arguments on the grounds raised, the Ld. AR stated that he would first want to invite attention to certain relevant documents on record. For the said purpose, attention was invited to copy of the seized documents placed at pages 44 -47 of the Paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputer for mail of the account found or might have left the some one unknowingly. 6.2. Attention was further invited to the very same page i.e paper Book page 61 so as to submit that the assessee carrying out a search through the internet became aware of certain relevant information which it was presumed that the department would be interested in to reach the true facts of M/s Smridhi Sponge. Accordingly it was submitted that the following specific information was shared with the AO so as to justify that the assessee had no dealings with the said concern and the appropriate enquiries qua the seized documents may be made from the said concern or the Assessing Officer of M/s Smridhi SPonge directly:- The assessee company has undertaken a search through interpet and have collected certain details about M/s Smridhi Sponge Ltd. 1. Office Address 23, Netaji Subhash Road, Kolkata, West Bengal - 700001 2. Company Registration No.:- 067187 3. PAN AADCS 7018l 4. Jurisdiction WBG/W/113/4 5. Directors Particulars Particulars of Directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectors of M/s. Galaxy Exports (P) Ltd is also enclosed. 2. M/s. Galaxy Exports (P) Ltd is manufacturer of M.S. Ingot and Sponge Iron is one of the basic raw material for production of M.S. Ingot. 3. M/s. Galaxy Exports Private Limited is operating Bank Account bearing No.1021 with PNB Jamshedpur, the branch is located at Ashiana Complex and branch code is 2894. Following two cheques have been encashed from above account of the M/s.Galaxy Exports (P) Ltd -4/12/07 MR.JUN ch.No.177699 Rs.2500000/ - 9/12/07 MR.JUN ch.No.186001 Rs.1500000/- The amount of above cheques are appearing in loose sheet found during search in respect of M/s. Smridhi Sponge. (emphasis provided) 6.4. Heavily relying upon these facts, evidences and arguments made before the AO where the assessee was requesting in good faith to the AO to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of M/s Simridhi Sponge with evidence. However, AO never dispose of the objection raised by the assessee regarding having any transaction with M/s Simridhi Sponge. Thus AO has failed and here to the applicable provision of I.Tax Act. (emphasis provided) 6.5. In the above background, it was his submission that it is surprising that despite these facts, the AO insists that the assessee is answerable for explaining the transactions found on its computer with M/s Smridhi Sponge. The assessee s answer has all along been on record as no transactions were ever done by the assessee with the said concern who was a stranger to the assessee. It was his submission that the assessee has done what it c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than the actions it is the inactions of the department it was submitted which becomes questionable. It was submitted that for the efforts done by the assessee which ideally should have been done by the department it was submitted that instead of carrying the enquiry to its logical conclusion the authorities have instead viewed the efforts of the assessee with suspicion and forget about lauding the assessee have instead caste aspersions on the efforts of the assessee who out of the compulsions and necessities of needing to save itself from the consequences of the additions on unrelated facts has all along given relevant facts searched diligently on the official government sites and made available to the department. It was his submission that it is presumed that the search and seizure efforts of the department are for the purposes of unearthing undisclosed income, thus where as per the seized documents transactions found from the assessee s premises transactions with the said concern is denied the denial remains unrebutted the assessee on the other hand demonstrates the connections of M/s Smridhi Sponge with M/s Galaxy why is there a reluctance with the department to proceed against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was further emphasized that the assessee s representative visited M/s Smridhi Sponge Ltd. at Jamshedpur office and made efforts to obtain confirmation from M/s Smridhi Sponge s however referring to Paper Book page 69, these efforts did not succeed as the assessee being a total stranger to M/s Smridhi Sponge the said concern refused to oblige. The submissions are extracted from the said page hereunder:- It is pertinent to note that assessee efford to collect evidence etc has failed as M/s. Simridhi Sponge has denied to response to the request of the assessee's representative who visited them at Jamshedpur office after receipt of the assessment order. 6.7. In this background, petition to file fresh evidence before the CIT(A) was moved, copy of the same it was stated is at page Nos.-70-75 of the Paper Book filed. The assessee assailed the repeated adamancy of the AO before the CIT(A) for not carrying out the due and necessary enquiries in the manner which he was supposed to make. The following submission before the CIT(A) extracted from page 70 of the Paper Book relied upon are extracted hereunder for readyreference:- That AO issued notice u/s 133(6) at the giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (emphasis provided) 6.9. Attention was also invited to the following bonafide efforts of the assessee to assist the department in its quest to trace income relatable to the seized documents. These submissions are extracted hereunder from page 72 of the Paper Book :- Assessee has down-lodged Financial statements and Annual Return filed by the M/s Smridhi Sponge with ROC for F.Y. 2006- 07 and F.Y. 2007-08 and has noted following relevant details which can be co-related with seized loose sheet. It has been noted from Audited Accounts of M/s Smridhi Sponge Ltd. that they are availing overdraft Bank facilities mainly from Union Bank of India, SSI, Jamshedpur Branch. The assessee has collected the address Branch which is as under:- Union Bank of India Jamshedpur-SSI Finance Branch Opp. Ram Mandir, Bistupur Jamshedpur, Jharkhand Phone No. 06572435129 That it has been noted from seized documents (Annexure A-1 Page No. 11 to 14) that M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue. Attention was also invited again to the index of the Paper Book wherein at Serial No.-13, the following information as per record was provided to the Revenue:- 13. Copy of Rejoinder to Remand Report dated 13.02.2013 filed before ACIT Page-128-132 - Detail of Registered Office Share Capital of Samridhi Sponge Ltd. Page-133-134 - Copy of confirmation of Delco India Pvt.LTd. Page-135 - Copy of Confirmation of Samridhi Sponge Ltd. Page-136 - Details of Directors of Samridhi Sponge Ltd. Page-137 6.12. Taking us through the documents filed and co-related with the seized documents it was his submission that where on facts the assessee repeatedly states that it had no interactions with M/s Smridhi Sponge and the repeated statement is supported by an affidavit, the nature of work of the two concerns being entirely different has been addressed where the seized documents demonstrate that M/s Smridhi Sponge had interactions with M/s Galaxy Exports whose complete particulars like that of Smridhi Spogne are filed alongwith bank details, PAN details etc why does the Revenue it was questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in Audited Financials were established. -After receipt of Remand Report assessee communicated to the LD. CIT -Assessee sent one letter dtd. 20- 09-2012 to one of the director and also sent his representative to the factory in Jharkhand however, no response was received. However, through a Iron Steel Broker, assessee has received letter dtd. 11.10.2012 signed by the director in which it was confirmed that they have no transaction with the assessee company. -It was also informed to the department that assessee is making effort to pursue Smridhi Sponge to send those documents directly to department in the form of reply to notice issued u/s 133(6) of the Income Tax Act. Letters sent to Jamshedpur Address and New Kolkata Address as well by the Ld. AO while matter was on remand. However letters were again unserved. Fact that the Letter dated 11.10.2012 was received was denied by Ld. CIT and alleged that appellant wanted to drag and delay the issue. 1. No letter is sent to the bankers of Smridhi Sponge Ltd. 2. No letter has been sent to Galaxy Exports. 3. Assessee said that Letter dated 11.10.2012 has been received. 4. Assessee has never said that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly if the assessee fails on the man plank of its arguments. 7. The Ld. CIT DR relying upon the findings recorded in the assessment order submitted that his arguments also would also not only address the grounds in the Revenue s appeal but would also address the appeal of the assessee for both the years. Referring to the facts it was his submission that on facts it is evident that the assessee is engaged in the business which was not disclosed to the Revenue. Relying upon the assessment order and even the impugned order, it was his submission that the manner in which the assessee is coming up with information about the M/s Smridhi Sponge Ltd. repeatedly giving different addresses, it demonstrates the falsity of the pleadings of the assessee in stating that is has no interaction with the said concern. In the face of the various details of these concerns given by the assessee, both the authorities it was submitted have rightly rejected the false claim of the assessee and held that the assessee on facts had interactions with M/s Smridhi Sponge Ltd. which are not recorded in its books of accounts. These arguments of the assessee it was submitted have been strongly deprecated by the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, the arguments that the addition is not warranted on facts it was submitted is not correct. The burden placed on the assessee u/s 292(C), it was submitted has not been discharged and the income has rightly been added in the hands of the assessee. 8. In reply the Ld. AR reiterated the submissions advanced emphasis was laid on the fact that the bonafide efforts of the assessee in addressing the seized documents are duly and diligently made available to the AO repeatedly informing the said authority that the assessee has no dealings with the said concern alongwith the request to the AO to please investigate from the other concerns. Attention was invited to Paper Book page 128 which addresses the Remand Report (at pages 125 to 127) of the AO where he reports that the notices sent to the new address also came back unserved from the Kolkata address with the comment left and Jamshedpur as addressee left . It was submitted that these comment itself prove that the said concern did exist at these addresses. Addressing the reply filed by the assessee at page 128 onwards it was stated that the information provided was as per the ROC records and there is no change in any partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For Smridhi Sponge Ltd. Sd/- Director The assessee is making all efforts to pursue M/s Smridhi Sponge Ltd to sent the above letter directly to the department with the copy endorsed to the assessee. However, it appears that unless any communication is made by department address to SSL even in the form of a copy of earlier s letter sent by AO u/s 133(6) of the I.T. Act with endorsement to the assessee, SSL is reluctant to respond to the department directly. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial which may not be accepted as evidence in a Court of law and since the documents were found from the premises of the assessee, the burden of proving that it was not so was cast upon the assessee. For which purpose, reliance was placed upon section 106 144 of the Indian Evidence Act. The relevant extract filed in the written submission is reproduced hereunder for ready-reference:- According to the Indian Evidence Act, presumptions can be made regard to certain facts by the Court unless rebutted by the assessee. In this case, facts regarding possession of the document showing trading transactions sale and purchase with Smridhi Sponge in the computers of the assessee has not been rebutted. 106. Burden of proving fact especially within knowledge- When any fact is especially within the knowledge of any person, the burden of proving that fact is upon him. 114. Court may presume existence of certain facts. The Court may presume the existence of any fact which it thinks likely to have happened, regard being had to the course of natural events, human conduct and public and private business, in their relation to the facts of the particular case. (g) that eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The assessee was asked to furnish the details of these entries on each of the pages and correlate with the books of accounts. In response, the assessee submitted that these do not pertain to it, and has filed affidavit in support of its contention. The assessee has also submitted the assessment details of M/s Smridhi Sponge as well as its directors and the mailing address of M/s Smridhi Sponge. (Emphasis provided) 10.1. It is also a fact on record that acting on the information, the AO sent notice u/s 133(6) of the Act to the address provided by the assessee. The fact that it returned unserved is found recorded in para 6.1 of the assessment order. On these facts, the addition made was challenged. It is seen that the CIT(A) accepting the arguments of the assessee that the notice u/s 133(6) returned unserved was not confronted to the assessee permitted the assessee to produce additional evidence. The fresh evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ron whose name and address has all along been provided to the AO found mentioned at page 65 of the paper Book and also at page 137 of the Paper Book. It is also seen that copy of particulars as per ROC records of M/s Galaxy Exports (P). Ltd. were also again filed in support of the claim that the continued efforts of the assessee in tracing the said concern show that the very same results qua its address and that of the directors are shown in the public domain by the said concern. Accordingly it is seen that a request to cross-check the information again including the confirmation dated 11.10.2012 from the Director of M/s Smridhi Sponge Ltd. were relied upon. These facts are reproduced in the earlier part of this order affirming the assessee s stand stating that M/s Smridhi Sponge Ltd. never had any transactions with the assessee. 10.2. The record shows that these facts, evidences and the said confirmation of assessee s version was dismissed by the CIT(A) holding as under:- 7.3. The AO again issued a notice under section 133(6), but this notice was too again received back, with the remarks of postal authorities Left . Now when this fact was informed to the appellant on 14.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found from the assessee s business premises necessarily the presumption that they relate to transactions with M/s Smridhi Sponge outside the assessee s books of accounts. However on the quantum of the additions partial relief was given which is challenged by the Revenue. The said finding has been challenged by the assessee. 10.4. In the context of the above facts on record, we find that where we have called upon to consider the provisions of section 292C of the Act, it is appropriate to first set out the specific provision:- 292C. (1) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 132 or survey under section 133A, it may, in any proceeding under this Act, be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from internet enclosed. 1. Further enquiry on internet sites reveals following details regarding one of the name appearing in loose sheet (in the account of M/s. Smridhi Sponge Ltd) viz., GALAXY. It is a private limited company having registered office at P-25 Prince cap street 1st Floor Kolkata, West Bengal. The complete name of the company is M/s. GALAXY EXPORTS PRIVATE LIMITED. The list of directors of M/s. Galaxy Exports (P) Ltd is also enclosed. 2. M/s. Galaxy Exports (P) Ltd is manufacturer of M.S. Ingot and Sponge Iron is one of the basic raw material for production of M.S. Ingot. 3. M/s. Galaxy Exports Private Limited is operating Bank Account bearing No.1021 with PNB Jamshedpur, the branch is located at Ashiana Complex and branch code is 2894. Following two cheques have been encashed from above account of the M/s.Galaxy Exports (P) Ltd -4/12/07 MR.JUN ch.No.177699 Rs.2500000/- - 9/12/07 MR.JUN ch.No.186001 Rs.1500000/- The amount of above cheques are appearing in loose sheet found durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f M/s Smridhi Sponge Ltd. and also traces the two specific cheque numbers mentioned in the seized documents which were paid by the bankers of M/s Galaxy found mentioned as Galaxy in the seized documents however surprisingly for unstated reasons the department sits back after issuing notices to the address provided of M/s Smridhi Sponge relying blindly on section 292C of the Act only on the rationale that the print outs had been founded from assessee s premises and thus they necessarily disclosed the assessee s undisclosed transactions with the said concern. The said conclusion of the tax authorities is completely misplaced on facts. A perusal of section 292C shows that a statutory presumption can be drawn where any documents is found in possession of a person in the course of a search or survey that it belongs to such a person . A presumption is also drawn that the contents of such a document are true. The presumption having been drawn as per law is required to be confronted and the documents as per record have been confronted. Whether the onus placed upon the assessee in a given set of facts is discharged or not has to be seen from the replies of the assessee based on facts. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation provided is surprisingly unfortunate. We fail to understand why no efforts whatsoever as per record were made by the AO either in the assessment proceedings or Remand proceedings to obtain relevant information from the Assessing Officer of M/s Smridhi Sponge Ltd. an entity with a thriving business and enquire into the information in its possession to its logical conclusion by tracing possible transactions not disclosed to the tax authorities. The fact which repeatedly emerges is that the information which comes to the knowledge of the AO repeatedly is not acted upon. The possible reasons for this reluctance with which we need not concern ourselves in the present proceedings however, may be a case of serious concern for the department. The silence of inaction speaks much louder than the frenzy of the misdirected actions necessitating a pro-active department to address the fest spreading malaise lest the tools of search and seizure are reduced to a farce. The repeated inactions speak louder than the half-hearted actions taken. We are of the view that as far as the assessee is concerned the onus to address the seized documents qua which a statutory presumption has been drawn sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the books is to be presumed. In the facts of the present case the efforts of the assessee in linking through the cheque numbers mentioned in the seized documents of M/s Smridhi Sponge with Galaxy mentioned therein as M/s Galaxy Exports having a specific bank account with PNB at Jamshedpur proves the correctness of the documents it is only their relation with the assessee which remains unproved. The efforts of the assessee through third party evidences that too by way of information on the government web sites in public domain by way of making information available from the ROC and income tax sites gives more then sufficient information to the tax department to act thereon which for reasons best known to the concerned officers remains unaddressed however, as far as the assessee is concerned the onus to meet the statutory presumption stands discharged. No corroborative evidence, infact no evidence whatsoever has been placed on record to show in the face of the assessee s efforts and stand that the document pertains to the assessee. 11. Accordingly in view of the above detailed finding on facts which turns on facts peculiar to the present case we hold that Ground Nos.-4 to 8 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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